Give Nn Credit, Say Top Rating Companies

NEWPORT NEWS — Moody's cited Newport News' aggressive new debt policy, its surpluses and a strong and diverse local economy.

The waiting game is over for Newport News.

Moody's Investors Service and Standard and Poor's, two top Wall Street rating companies, have left the city's credit rating untouched, city officials said Monday.

That means the city will not have to pay a higher interest rate when it borrows money this year.

The good news for Newport News comes a month after Suffolk learned that Moody's downgraded its credit rating because Suffolk spent too much of its cash reserves.

Last fall Moody's officials expressed caution about Newport News' $535 million debt, and some city officials worried that Moody's would downgrade its rating. Standard and Poor's, another credit rating agency, confirmed late Friday that it would also leave the city's rating alone, said Gregg Jones, the city's budget director.

One of the things that helped Newport News keep its good credit was an aggressive debt policy the city adopted in January, city officials said.

The new policy, which aims to lower the city's current debt by about $160 million in the next five years, states that the city will use more cash to pay for smaller projects and repay some loans faster.

"I am very pleased that the financial policies we put in place have been noticed," said City Manager Randy Hildebrandt, who made lowering the city's debt burden one of his priorities when he took his job a year ago.

Moody's also noticed that Newport News closed its books with surpluses for the past two years.

Last fiscal year, which ended June 30, 2006, the city reported a $9.8-million surplus.

This year the city expects the surplus to be about $12 million.

While that sounds like good news to some, news of the surpluses have provided fuel to the fire for homeowners who say the city is overtaxing them.

Moody's is also pleased that Newport News has tried to close the gap in its $212 million pension shortfall.

Newport News' debt ratio for this fiscal year is 3.89 percent -- more than the national average of 3.2 percent and more than those of several other local cities.

Chesapeake, Virginia Beach and Norfolk have ratios that range from 2.3 percent to 3.2 percent. Only Hampton and Portsmouth have a higher debt ratio -- 4.4 percent and 5 percent, respectively.

In its report, Moody's mentioned that the city's debt was still above average but manageable.

The city's plan to repay some loans faster and pay for some projects with cash would lower the debt ratio from 3.89 percent to 3 percent.

Moody's assigns a letter to its rating -- with a single A being the lowest rating and a triple A being the best possible rating. The higher the letter rating, the lower the interest rate a city or county will pay for the money it borrows.

Moody's assesses a city's rating every time it wants to borrow money.

Newport News will keep its Aa2 rating, which it has had for decades.

"The city did everything the agency wanted us to do," said City Councilman William Haskins. "We must be managing our debt very well."

Moody's also cited a strong and diverse local economy and was pleased with the growth of the city's $13.7 billion tax base.

City officials said they were "cautiously confident" when Moody's officials visited Newport News in December.

"We had a good feeling," Jones said, "but we didn't want to take anything for granted." *

LOCAL CITIES' CREDIT RATINGS

"A" is the lowest, and "Aaa" is the highest. Cities with an "Aaa" rating pay less to borrow money than those with an "Aa" or "A" rating. The number next to the letter ranks the city within its category. The higher the number, the lower the credit rating within the category.